MARKET WRAPS
Stocks:
European equities were little changed on Wednesday, mostly struggling for direction, as investors continued to fret about global economic growth and monetary policy direction.
A raft of U.S. data later in the day will likely keep investors on edge as they scrutinize the details for signs the world's biggest economy has weakened.
Stocks to Watch
Nestle can benefit from a more supportive yield environment going forward following a 16% share decrease last year, Jefferies said, upgrading the stock to hold from underperfom at a target price of CHF115.
"The biggest calendar year shift in the 10-year Treasury this century put downward pressure on valuations generally. "But with the 10Y set to be flat to down in 2023 we see the environment as more supportive," Jefferies said
The food giant is forecast to post organic sales growth of 9.3% in the fourth quarter entirely led by pricing with a flat real internal growth, according to Jefferies .
Underlying margins and earnings per share are seen at 17% and CHF4.80, respectively,
Davos Commentary
The spread of inflation into the wider economy, away from just energy prices, may be a cause for concern this year, according to the CEO of ABN AMRO.
"The worry I do have as we look forward into 2023 is that underlying inflation is now also [rising], so inflation has been not just limited to energy-price hikes," ABN's Robert Swaak told CNBC in an interview at the World Economic Forum in Davos.
"So we see the energy component starting to be less relevant to inflation and more the underlying components, underlying inflation," he says. The question now is how inflation will continue to behave and, in Europe, the subsequent response by the European Central Bank.
Read More Commentary
Europe Could Avoid Recession, UniCredit's Orcel Says
EU Must Show Attractiveness as US Inflation Act Endangers Investments, Gentiloni Says
ECB Members Could Dismiss Report of Slower Rate Rises, Lifting Euro
EU Ready to Issue New Russian Sanctions, Polish Prime Minister Says
Era of Cheap Money Is Gone, JPMorgan EMEA CEO Says
U.S. Markets:
Stock futures edged higher ahead of retail-sales data and earnings that will give clues about the health of the economy.
Coming up, PNC Financial Services, Charles Schwab, Prologis and JB Hunt Transport Services are due to file earnings before the opening bell. Kinder Morgan and Alcoa are among those scheduled to report after the close.
Data on producer prices and retail sales are due at 1330 GMT, followed by industrial-production data at 1415 GMT.
St. Louis Fed President James Bullard speaks at a WSJ event at 1330 GMT.
Forex:
The dollar could fall further if today's U.S. data show signs the economy is cooling, ING said.
"The market's scrutiny over the U.S. economic outlook has grown exponentially since the ISM service report pointed to an imminent recession: expect more pain for the dollar should fresh signs of a slowdown emerge now that the U.S. data calendar is picking up again," ING said.
U.S. retail sales and producer prices data will be released at 1330 GMT, industrial production figures are at 1415 GMT and Treasury International Capital flows data are at 2100 GMT.
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Sterling rose after data showed U.K. inflation eased slightly in December but remained elevated, supporting the case for the Bank of England to raise interest rates further.
Read U.K. Inflation Falls for Second Month, Following Global Move
"This level of inflation is likely to mean the BOE continues to keep a tight rein on financial conditions," Premier Miton Monthly Income Fund said.
Bonds:
Eurozone government bond yields were lower after the Bank of Japan kept its interest-rate targets unchanged and made no change to its yield-curve control that allows the 10-year government bond yield to move 50 basis points either side of its 0% target.
The BOJ also said it would continue large-scale bond buying and increase purchases on a flexible basis if needed, "showing a firm commitment to yield-curve control for now," UniCredit Research said.
Read Despite Pressure, Bank of Japan Keeps Interest-Rate Targets Unchanged
Read Government Bond Supply Dynamics in Eurozone to Regain Relevance for Spreads
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Many investors have begun to position for falling interest rates as inflation risks have cooled and recession risks have risen, Morgan Stanley Wealth Management said.
However, downward pressure on Treasury yields could be offset by bulging fiscal deficits, the Federal Reserve's quantitative tightening as well as tightening by the European Central Bank and the BOJ, it said.
"The end of the ECB's bond purchases could leave issuance of euro-denominated debt at a level not seen in more than 20 years," Morgan Stanley said, adding that this comes at a time when risks of rising U.S. debts and deficits could also increase Treasury issuance.
Energy:
Oil prices rallied after the IEA said China's reopening will help push oil demand to a record level this year.
Brent hit its highest level since November after the IEA said .oil demand should average 101.7 million barrels a day this year, a record level, thanks largely to China's reopening.
The watchdog added just under 200,000 barrels a day to its 2023 oil demand growth forecast in its monthly report, taking in 1.9 million barrels a day.
Read more from the IEA here .
Metals:
Base metals made solid gains with gold also in positive territory, as worries over hawkishness from the BOJ were eased after it maintained its policy on interest rates.
Marex added that Chinese "infrastructure construction will accelerate after the Chinese New Year," with a number of investments to be introduced to support new construction projects.
DOW JONES NEWSPLUS
EMEA HEADLINES
U.K. Inflation Falls for Second Month, Following Global Move
The U.K.'s annual rate of inflation fell for a second straight month in December, the latest sign that the global surge in consumer prices that began in early 2021 is slowing.
Consumer prices in the U.K. were 10.5% higher than a year earlier, a slower rate of inflation than the 10.7% recorded in November as gasoline prices cooled, the Office for National Statistics said Wednesday. The core rate of inflation was unchanged at 6.3%, while prices of food and beverages rose at the fastest pace since September 1977.
Bayer Could Go the Way of General Electric and Daimler
In the slow-burning decline of the industrial conglomerate, the next shoe to drop might be German drugs-to-crops giant Bayer.
The inventor of aspirin has attracted a lot of attention from activist investors lately. Jeff Ubben's Inclusive Capital Partners disclosed a stake last week. Bluebell Capital Partners, a small European fund that helped to oust the former chief executive officer of French yogurt maker Danone, also has built a stake.
Germany's BASF to Post 2022 Loss on $7.90 Billion Impairment
Germany's BASF SE expects to post a net loss for 2022 after booking impairments worth 7.3 billion euros ($7.90 billion) from the deconsolidation of Russian exploration and production activities after Moscow's invasion of Ukraine.
The German chemicals giant said Tuesday that it expects to book EUR5.4 billion of the total impairment in the fourth quarter of 2022, swinging to a net loss of EUR1.38 billion from a 2021 profit of EUR5.52 billion. BASF's forecast, based on preliminary figures, is considerably below analysts' forecast of a EUR4.77 billion profit, the company said.
Continental Cuts 2022 Adj. Free Cash Flow Guidance Again
Continental AG lowered its adjusted free cash flow expectations for 2022 amid further customer payment delays.
The German car-parts manufacturer said it expects to post adjusted free cash flow of 1.6 billion euros ($1.73 billion) in the fourth quarter of 2022, which would result in an adjusted free cash flow of EUR200 million for the year.
Pearson to Report Rise in 2022 Underlying Sales
Pearson PLC said Wednesday that it expects to report a rise in underlying sales for 2022, and that it finished the year ahead of the board's expectations.
The FTSE 100 education company said group underlying sales are expected to be 5% higher on year, with sales at its assessment-and-qualifications division--its largest business--up 8%, and up 24% at its English language learning division.
Richemont 3Q Dampened by China's Pandemic Outbreak, But Tourist Spending Boosts Europe Sales
Compagnie Financiere Richemont SA on Wednesday said sales growth slowed in its fiscal third quarter against tough comparison bases and with demand in China hit by further Covid-19 disruption.
Deutsche Bank Names New Compliance Chief as Part of Reshuffle
Deutsche Bank AG tapped a veteran of Barclays PLC and American Express Co. to be its new chief compliance officer and reshuffled other positions as the German lender works to revamp its compliance programs in the wake of several regulatory investigations in recent years over its business conduct and compliance controls.
Laura Padovani will join Deutsche Bank on April 1 as its group chief compliance officer and head of compliance, according to a memo seen by The Wall Street Journal. Ms. Padovani spent seven years at Barclays, most recently as its compliance chief, and 20 years at American Express. She will be part of Deutsche Bank's executive committee and will be based in London with a presence in the Frankfurt office, the announcement said.
EU Passenger Car Registrations Increased in December, But 2022 Still in the Negative
Registrations of passenger cars in the European Union increased in the last month of 2022, although the full year still showed a contraction in registrations as a result of component shortages in the first half of the year, the European Automobile Manufacturers Association said.
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01-18-23 0551ET
